Home loan affordability depends on many factors – the economic conditions of the time including interest rates, home prices and their relationship to income and in particular current COVID19 rental regulations. In the last few years there has been a lot of publicity about first home buyers being pushed out of the market due to rising prices. But is this still true?
After all, the cost of renting a property for those who don’t buy is also very relevant. As fewer first home buyers have been able to afford to buy, rents too have been on the increase of late. At the same time, there has been so much talk of the global recession, so interest rates have fallen in most areas to stimulate growth while at the same time housing prices have at last started to increase for investors/landlords.
Perhaps, after all, it’s now a good time to buy, since prices and interest rates have both dropped over the past 6 – 7 years with increases starting to appear only over the last 3 – 4 months, thereby increasing affordability, especially in relation to the cost of rental accommodation comparatively speaking.
Furthermore, many people find that making home loan repayments is a form of forced saving that helps them control their finances, while rent payments by contrast, go out without ever coming back. And if they wait until the next ‘boom’, their savings will not increase at the same rate as housing prices and the chances of being able to afford a home in the future will actually diminish!
People who have experienced firsthand the recent rent hikes should do their sums – especially if they have some savings or if they have family who can help them with a deposit. Sometimes affordability is a mindset, and a more objective evaluation of the current conditions (in consultation with your bank and your accountant/financial adviser) might demonstrate that the current ratio of rents, interest rates and housing prices makes buying a home more accessible than many think.